Is code generation the first “killer app” for language models or mostly the killer app for enterprise users?
Since 2024, one might argue, model spending on language model application programming interfaces has more than doubled. Where model development might have driven spending in prior years, inference now seems to be driving growth.
According to Menlo Ventures, Anthropic has surged to the lead in enterprise market share, while OpenAI has lost share. Google’s Gemini growth rate also parallels that of Anthropic.
And there seems ample reason to believe that, at least in the enterprise portion of the market, the drive to gain share fast, and invest heavily in upgraded models, has a clear customer logic. Enterprise customers do not tend to switch model suppliers once they have made a decision. But they also will upgrade based on access to better performance.
The former preference encourages the importance of gaining share fast, as once an enterprise commits to a particular platform, it will tend to stay. The latter preference explains the intense effort to produce more-capable model versions, as that drives model upgrade or switching behavior on any platform.
So performance clearly matters for retention, not simply customer acquisition.
So where an order of magnitude price drop might convince many consumers to use an “older” model, enterprise users tend to behave differently, preferring to buy the latest and most-capable model.
Consumer trends are different, of course. Most consumers use the free versions of models. That has meant the monetization model is converting users of the unpaid versions to model subscriptions. But Menlo Ventures does not believe that will be the dominant form of monetization in the future, anymore than subscriptions have been the driver for search, social media or e-commerce.
“The biggest long-term monetization opportunities won’t be subscriptions,” a Menlo Ventures report argues. “We expect rapid adoption of advertising models, transaction fees, affiliate revenue, and marketplace models.”
In the near term, others might say subscriptions are going to remain the leading direct monetization model.
Of course, different models are going to make more sense than others, depending on the use case. What makes sense for an autonomous or embodied deployment will not make as much sense for transaction use cases or content consumption.
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